Vast areas of ancient Aboriginal rock art dating back to the last ice age will be protected in Australia's northwest. But some may be moved to make way for a major gas terminal, the Australian government says.

The decision clears a hurdle for Woodside Petroleum's plan to build a A$10 billion (US$8.6 billion) gas project near the port of Dampier.

Environment minister Malcolm Turnbull says he has balanced the needs of the environment with Australia's economic development.

But critics have condemned the decision as not doing enough to protect the rock art, or petroglyphs.

"The minister's belated decision ... comes too late to stop the damage that has occurred, and is sadly framed to allow further damage," say Greens senator Rachel Siewert, Labor politician Carmen Lawrence and independent Peter Andren in a joint statement.

Turnbull says he will declare an area of 241 square kilometres in the Dampier Archipelago and Burrup Peninsula as heritage sites, covering tens of thousands of ancient Aboriginal rock images.

The petroglyphs depict people and animals, including fish, turtles, kangaroos and snakes. Some animal species have been extinct for thousands of years, Turnbull says.

"In the rocky red valleys we can begin to understand how Aboriginal people responded to changes in the landscape after the last ice age," he says.

But companies with leases over an area of 1% of the new heritage sites will be allowed to continue developments by working around the petroglyphs and will be permitted to move the giant red rocks if needed.

Turnbull says the compromise decision would allow development to go ahead around Dampier, Australia's second largest export port, which supports thousands of jobs and more than A$35 billion worth of mining and resource projects.

Woodside says it supports the decision, which would allow for further preparatory work on the site of its Pluto liquefied natural gas (LNG) plant, terminal and storage tanks.

Site preparation work began on the LNG plant in January, but has been awaiting Turnbull's decision on the rock art.

A Woodside spokesperson says the company supports the decision.

"We believe it provides proper recognition of the heritage of the area. We're pleased that the minister has recognised that industry and heritage can co-exist," the spokesperson says.

Woodside has already moved about 42 pieces of the rock art in preparatory work for gas storage tanks for the project, which is scheduled to start delivering LNG by 2010 if it goes ahead.